A legal war with FanDuel co-founder Nigel Eccles has taken a major turn after a New York court declined to dismiss key parts of a case against private equity investors.
New York Court Allows FanDuel Founders’ Claims Over Disputed 2018 Merger to Proceed
A New York Supreme Court decision to let claims against KKR and Shamrock Capital is going forward. The suit was originally filed by Eccles and other founders and early employees who argue they were denied fair value in a key corporate transaction in 2018.
The heart of the case is the merger of FanDuel and Paddy Power’s US operations. Plaintiffs say company leadership and big investors placed an artificially low value on FanDuel’s stake in the combined business. They argue that this valuation ensured that preferred shareholders were rewarded, while early contributors holding common shares were left out in the cold.
Court documents show the FanDuel board valued its stake in the combined entity at just over half a billion dollars. That same stake, however, was subsequently sold for several billion dollars, prompting plaintiffs to question how the earlier figure was determined. They argue the discrepancy effectively nullified the value of their holdings just as the US sports betting market was starting to take off.
The court’s latest ruling does not settle the dispute but keeps key claims in play. Allegations of misconduct, including breaches of duty and collusive wrongdoing, persist. There was enough to warrant a more detailed look at these issues at a later stage, said the judge.
Founders Challenge How Value Was Divided in Major Merger
Legal arguments in the case have also centered on whether the defendants properly exercised their rights under their contracts. In particular, attention has been paid to provisions which allowed majority shareholders to force minority investors to sell. The court noted that, at this stage, a dismissal would not allow a full review of evidence to determine whether those rights were used fairly.
The origins of the dispute trace back to FanDuel’s meteoric rise from a Scottish startup to a powerhouse in American sports betting. Founded in 2009, the company grew rapidly as daily fantasy sports exploded and then transitioned into real-money betting following regulatory changes in the US.
However, the recent courtroom development suggests both sides are in for a long legal battle. The investors have denied the claims and have also separately argued about previous agreements with Eccles. The case is likely to undergo further proceedings and perhaps even a full trial, as there are still many complicated matters in dispute.
